Can publishers and customers meet on ebook pricing?

December 20, 2011 | 8:46 am

Some interesting threads on here these last few days about the price of content. Are publishers gouging customers with prices that are unfairly high? Are customers bringing about the ruination of the media industry by demanding prices that are too low? Is there a halfway point at which these two conflicting groups can meet?

I think there is. I would like to introduce the concept of pricing relativity. That is, a price should be considered not so much as an entity unto itself, but an entity in relation to what other choices a customer who may be in the target market might have available to them in the same purchasing moment. If you can’t deliver your product at a price that is competitive to that customer, you need to lower your production costs. Similarly, if you find you are all but giving it away and the customer is happily paying elsewhere, you can adjust upward a little and see how it goes.

There are two key arguments I want to make in favour of this pricing model. Firstly, I want to emphasize that what I, as a customer, am asking for here are FAIR prices, not free ones. I don’t think all content needs to sell for a dollar. I recognize that quality content does cost money to produce. I don’t think it costs as much money as Big Pub seems to, and I don’t want to feel like I am being taken for a ride, but I am willing to pay a reasonable and fair price for content.

This is where the second factor of pricing relativity comes in—you need to consider what else your customer might spend this same money on in that moment of making their purchasing decision. I am not asking publishers to give me a trip to France for the cost of a croissant from the deli here. But if I am in the market for a croissant from the deli, I could possibly be persuaded to buy a muffin instead. We are talking about like content here, not trying to apply the pricing models of wildly different media to this one purchase.

So, how would pricing relativity work in practice? Consider the person who is searching for a new release best-seller. Yes, they could buy a Smashwords indie book for 99 cents, but that’s a wholly different demographic. What other options might be available to THIS customer in this same product niche? If the hardback new release is $20, you can get away with charging them $12 for an ebook. For that product, for that demographic, it may be a fair price.

But let’s say the customer is looking for an older title which has been available in cheap paperback for some time? You are competing not just with used paper copies, $6 mass market paperbacks and so on, but also with backlist titles of a similar pedigree which their authors are self-releasing for a dollar or two on Smashwords. A DRM-infested, typo-filled $12 OCR scan is not going to fly with that crowd! If you are selling a backlist title, you are not competing with the $12 Stephen King new release so you need to price according to the niche your customer is buying within.

And it’s not just books either. Like many customers, I have a media budget which covers not just books but video games, movies, music and so on. These are different types of products, but they come at similar ranges of price point. My boyfriend is into those console video games which retail for $40-50. I like the little 99 cent iPod puzzle games. That fact that I could buy 40 of them for the price of his one game is not going influence his purchasing decisions in the slightest. We’re different markets. But it does mean that if I have 99 cents to spend and I know I could get an app, a song, a movie download or an indie Smashwords title, I might choose among those options, just as he might choose between the $40 game or the $40 Star Wars movie box set.

So, on the high end, what can I get for $10-12? A year’s worth of a magazine at Zinio. A month of unlimited movies at Netflix. A shared dinner in a medium-nice restaurant. If you are offering me an ebook at that price and you cannot convince me that is going to provide, in my mind, at least as much entertainment value as these other options, you’ve lost me. In some cases, the author will be a big enough ‘name’—to me—that I’ll decide it does provide that value. That will maybe happen for most readers once or twice a year. In other cases, I’ll go with the restaurant or the Netflix movie. And similarly, knowing that my 99 cents can get me a game or a movie if none of the books on offer appeal, I choose accordingly.

I subscribe to a cooking blog whose author recently started releasing weekly meal plans by donation, and she is learning about pricing relativity the hard way. She suggested a $5 minimum download. But the e-version of her cookbook—which serves the same market—goes for about $9 at the Kindle store. Why would I pay $5 a week for a two-page pamphlet when I could spend just a few dollars more and get a book with 50 times the content? I know she puts work into them and I know SHE values them at $5, but that’s all academic unless she can demonstrate to the customer that THEY should value it that way too. After a few weeks of apparently lackluster sales where she all but begged people to please start donating if they chose to download, she finally got smart and put out a survey. The market will tell her what value they place on this particular content, and if it comes out too low to make it worth the author’s while, I imagine she’ll stop making the weekly plans. Alternatively, it could work out that I am the lone dissenter and there really are droves of people willing to pay her the price she is asking. If so, best of luck to her. I won’t buy it at that price, but others will and she has a perfect right to sell it to them.

It’s not about blanket statements here where $12 is evil and $4 is good and greedy customers want books for free, free, free. It’s about smart marketing. It’s about recognizing what kind of product your book is, who is buying it, and what other choices they might make at this same level. If you can price your product in a way that provides equal value to other choices they have available to them, you’re golden. But if you overprice, they’ll simply turn to something else. In some cases, that means that if they can buy it in paper for less than the e-price, they’ll do so. But in other cases it might mean defecting to a different entertainment choice altogether. The important thing is that the vendor understand who they are aiming for and price to that market.

Comments:

While I would say that Pricing Relativity is simply another name for traditional intelligent market-sensitive pricing, I agree with the whole thrust of the article, a thrust that reflects what I believe most people hereabouts and out in the real world support.
The problem with the A6 pricing model especially is that it is clearly in defiance of all market place logic. The only criteria it appears to conform to is that of pricing as high as possible and still sell what they ‘deem’ to be a reasonable number of copies.
However as I commented on another thread this week, there is absolutely no evidence whatsoever, anywhere, that this number is anything like the number that could be sold if the pricing was rational, while also producing a higher overall margin. It also appears to be driven by this inane concept of ‘the worth of writing’, where the price of a title is held up as a “reflection of society’s appreciation of writing as a skill/art/gift”. What hubris.
Joanna writes well about backlists. It is surely insane that titles, even very good ones, from the 1950s or 1940s be priced at levels the same as new titles. All of the costs have been covered. There is no significant new cost for the publisher. Any revenue is wholly serendipitous and the author, if alive, has pretty much reached the stage where they can’t have earned more than a couple for quid for yonks ! Pricing these titles at full current price is the definition of dumb greed and opportunism, and a betrayal of the interests of writers who’s interests these organisations make a big noise about looking after!
I believe that authors need to become far more proactive in their relations with their publishers, if they have one. Leading authors appear to be so lazy with their advances and so mindlessly happy they are published, that they abandon all interest in pricing. They should wake up and realise they are the ‘talent’! They have power! They should be calling their publishers and demanding to know why their titles are being priced so high, and making it crystal clear to them that they would be earning far higher royalties if realistic market prices were being charged.

Even though I agree with this piece, the cost of creating an ebook from an existing book is probably a couple thousand dollars plus whatever money is paid in advance to the author or estate/heirs. If Simon & Schuster paid Ray Bradbury a million dollars (I have no idea if that’s the actual amount, of course) to gain the cachet of being Bradbury’s publisher, they still need to amortize it over the expected number of copies sold. Does this mean that the authors/estates are asking for too high an advance, or the publishers have low expectations of digital sales, or are they just milking an emerging market for as much as they can? It’s probably a bit of all three.

The reality of the publishing business is probably such that even the giants of the various genres from 20-50 years ago, if now dead, are unknown to younger generations and of perhaps limited appeal to the aging baby boomers. As a life-long SF reader, I can probably name a dozen or so dead authors I would probably rebuy as ebooks if the price were right. However, if the author never won an award, how likely is it that someone who was born about the time the author died will buy that ebook? Probably not at all. So, how does the publisher figure out how to price ebooks to maximize return? My suspicion is that the right price is actually somewhat less than the price of a new mass market paperback, but I don’t expect the A6 publishers to ever establish an ebook price point below new mass market paperback.

One important step that Amazon has taken very recently is that they estimate the approximate number of print pages an ebook would have if it were a print book. Before, consumers just had to guess, and this was beginning to be a problem.

By virtue of its market leadership, Amazon is basically providing strong incentives for ebook prices to be 2.99 and above. By not selling on amazon, you can break the 99-2.99 strait jacket . Maybe Amazon will change its pricing structure on its own in response to pressure, but I doubt it.

Another thing. The thriving used book market does prevent those backlist titles from being priced too high. A respected author I know is looking to publish as an ebook a book which went out of print 20 years ago. But the ebook publisher will probably be pricing it at 7.99 or 8.99 even though the price of buying the same book used is $1 + 3.50 or 3.99 shipping. That seems to be a reason why almost no ebooks will be sold.

I think that a lot of older, established authors have the idea that “If I could get a publisher to reprint my works in print editions, I’d be selling it for $8-15, depending on whether it’s MMPB or TPB, so that’s what it should be priced at as an ebook”. However, most of them would not be able to get a publisher to buy the rights and do a print run that would make it worth their while.

The problem is convincing them that their competition is not the non-existent new print edition, but the used copies, and that it’s better to price it to get the new sale with lower revenue instead of a used sale that gives them no money at all.

As someone who has scanned and prepped ebooks for Distributed Proofreaders as well as scanned and prepped ebooks for my own use, I know that for a relatively simple novel, it can take me at least 4 hours to scan, OCR, and do a reasonable first pass at proofreading and formatting. To do a good enough job to consider it publishable quality, it’s probably more like 16 hours. A second set of eyes, proofreading, 4 hours, checking out epub and mobi formats 4 hours, dealing with getting the ebook into the various systems at the publisher to get it “published”, 8 hours. 5 days salary (probably a bit high) @ 20/hour is $800, @40/hour is $1600, etc. And,if this is an older work, where the cover art was not purchased for the print and ebook, it’s probably another $500-$2000 (not that I know how much cover art costs). For a non-fiction book with footnotes, or any book with special formatting, it’s probably double my estimate for the time it takes to prep. I wouldn’t be surprised if the publisher could outsource it to someplace like India and get it done for under $500.

Considering the appalling quality that then appears for sale… it is clear that a fraction of that amount is being spent by the A6.

Personally I don’t buy for a nanosecond that it takes that length of time. A guy in my city explained how he did it a few months ago. He cut the book up into single pages, ran it though a scanner with OCR and proofed it. A few hours and it was done. And from what he said there were many many fewer errors than are appearing in titles being sold on Amazon by the A6.

Also you are only referring to titles where no digital version is available already.